Apple could overtake Intel as the world's top mobile processor company by the end of the year

Apple is an iconic consumer electronics company with a string of massively successful products, but it could also become the world's largest mobile processor company by the end of the year, according to a study due to be released by In-Stat later this week.

Apple was the world's second largest mobile processor company behind Intel in 2011, benefitting from growing smartphone and tablet shipments and a meltdown in the PC market, according to In-Stat. If that trend holds and Apple's iPhone and iPad shipments continue to grow at an unprecedented pace, Apple will likely overtake Intel as the world's largest mobile processor company by the end of this year.

Apple does not have a large gap to overcome. The company last year shipped about 176 million processors in devices such as the iPad and iPhone, representing a 13.5 percent market share. Intel took the top spot with 181 million processors shipping in mobile products such as laptops, a 13.9 percent market share.

"Apple's continued success of the iPhone and iPad, as well as the stronger growth rates of the smartphone and tablet markets than PCs" will help catch up to Intel, said Jim McGregor , chief technology strategist at In-Stat and author of the report.

Apple designs chips with ARM processors, which are found in most smartphones and tablets today. Intel's processors are used in some tablets, and the chip maker has virtually no presence in the smartphone market. Intel hopes to fight ARM's domination with a low-power Atom chip code-named Medfield, which will be used in tablets and also in handsets from Lenovo, Motorola, and ZTE later this year.

The study also accounts for mobile processors in portable media players such as Apple's iPod Touch, handheld gaming devices from Nintendo and Sony, and e-readers. However, the study does not count processors in desktops and servers, a market dominated by x86 processors from Intel.

But as mobile devices grow, the emergence of Apple as a processor company will matter even more to a company like Intel, which is struggling to establish a presence in the smartphone and tablet market, McGregor said. The smartphone and tablet shipments are already outpacing servers and PCs combined in units shipped, and the gap will grow even greater in the coming years, McGregor said.

Earlier this week, Apple CEO Tim Cook said it was only a matter of time before the tablet market surpassed the PC market in size, citing research firm Gartner's projection of tablet shipments reaching 325 million by 2015.

Apple serves a captive audience by using its A4, A5 and A5X mobile processors in its own devices, but that should worry Intel especially if Apple starts using its own processors in the MacBook Air laptop and other devices, McGregor said.

Mac computers currently use Intel chips, and the companies share a delicate relationship as partners and competitors. Apple's switch to homegrown technology in Macs could hurt Intel's chip shipments, McGregor said. There are rumors of Apple switching over to homegrown chips based on ARM in the MacBook Air at some point, though analysts say the possibility is remote in the near term due to technical and performance issues on ARM.

But Intel is taking protective action by pouring millions of dollars in the development of ultrabooks, which are thin-and-light Windows laptops that PC makers are pitching as an alternative to the MacBook Air.

"Why do you think Intel is putting so much into ultrabooks? It is not only to compete against tablets, but to offer competition to Apple, which could switch to the company's own products eventually," McGregor said.

Apple has also provided a boost to the ARM camp, which is also looking to challenge Intel in the PC space. Microsoft's upcoming Windows 8 OS will work on the x86 and ARM architecture, and companies like Qualcomm are looking to introduce ARM-based PCs as an alternative to Intel-based PCs.

"The more successful Apple is, the more credibility it adds to the entire ARM camp and the more competitive the ARM camp becomes as a whole," McGregor said.

ARM is on the rise as x86 declines in the mobile processor market, according to the In-Stat study. Following Intel and Apple in 2011 mobile processor shipments were Texas Instruments, Qualcomm and Samsung, which are all ARM licensees, while x86 chip designer Advanced Micro Devices took sixth place.

But questions remain on whether ARM processors will match Intel's Core processors on performance, McGregor said. Microsoft's Windows 8 seems to run better on tablets as opposed to PCs which could help ARM, but ultrabooks with Intel chips will look more like convertible tablets in the future, McGregor said. There are also driver and application compatibility issues facing Windows 8 on ARM.

But the impact of Apple as a mobile processor company will be felt as long as the iPad and iPhone shipments grow, McGregor said.

"It will interesting to see how things play out over the next few years, but it will be the consumers that ultimately decide the fates of the companies and technologies involved," McGregor said.